Compal Electronics has reportedly entered the supply chain of Apple Watch and will begin shipping products in the second half of 2017, according to sources from the upstream supply chain. However, Compal declined to comment on its orders or clients.

Currently, Apple Watch orders are solely handled by Quanta Computer. The upcoming next-generation Apple Watch, which is scheduled to be released in the second half, will continue to be manufactured by the Taiwan-based ODM; however, production of the existing second-generation Apple Watch will be partially given to Compal.

Apple is estimated to have shipped 11.9 million Apple Watches in 2016, accounting for 49% of overall smartwatch shipments, according to research firm Canalys.

Compal has recently moved equipment for smart device production to plants in Chongqing, preparing for Apple Watch manufacturing, and the orders will help fill the plants' empty capacity caused by decreasing notebook orders.

Compal has been moving equipment from plants in Eastern China to Chongqing since the second half of 2016, and the plants will gradually become the main production base for IT products including tablet, smartphone and wearable devices. The company is currently still evaluating the new uses for its plants in Nanjing and Kunshan, Eastern China.

Compal is the second largest notebook ODM worldwide and has been aggressively expanding into non-notebook businesses over the past few years. Compal shipped five million wearable and IoT devices in 2016, and the volume is expected to increase to over 10 million units in 2017 with the Apple Watch being a major growth driver, the sources noted.